Is there anything in RBI's monetary policy today for the common citizen of India?

Reserve Bank of India (RBI), under the governorship of Urjit Patel, will meet today in Mumbai to decide on its fourth-monetary policy of this year. The meeting is keenly watched for two reasons; one, Patel's first policy after Raghuram Rajan's exit and secondly, the first for newly constitued Monetary Policy Committee (MPC) that met over the past two days to deliberate over RBI's stance. 

In effect, Patel cannot do much as the rates, from now on, will be decided by the six-member MPC. However, the statement issued by RBI on India's macro economic picture is keenly watched as it is likely to set the tone for RBI's future policies. 

For a common citizen, RBI mainly performs two functions. One, the governor signs on their currencies. Second, cutting interest rates that directly impact their equated monthly instalments (EMIs) that they pay for their home-, car- and personal-loans, etc.

As this chart will explain, interest rates, or repo rate as RBI calls it, have been brought down to 6.5% over the past two years but banks have been reluctant to cut interest rates that directly impact us. 

source: tradingeconomics.com

Let's look at this with the help of an example. 

Suppose you have taken a home loan worth Rs 20 lakh at an interest rate of 9.50% for a 20-year term. At this rate, your monthly EMI will come to Rs 18,643. 

 If RBI cuts repo rate by 25 basis points and brings its benchmark interest rates to 6.25% today, your EMI will reduce to Rs 18,317, addding up to a saving of Rs 326 per month, or Rs 3,912 per year, or Rs 78,240 for the entire duration of the loan, i.e. 20 years. 

Similarly, if your home amounts to Rs 50 lakh for 20 years, your current EMI of Rs 46,607 will reduce to Rs 45,793. A saving of Rs 1,95,360 for 20 years, or Rs 9,768 per year. 

Moreover, this is only possible if your home loan is at a "floating" rate and not "fixed". Also, RBI meets every two months to decide on interest rates. Therefore, based on economic conditions, your EMIs may increase or decrease every few months.